Coffee Market Report
The Colombian Ministry of Agriculture and Rural Development has announced an investment of 58.70 million US Dollars for the financing of agricultural inputs for coffee growers whose crops do not exceed five hectares of mature plants. This economic incentive is intended to support to purchase of fertilisers, including bio inputs and biological controls to assist in mitigating the general effects of the El Niño weather pattern. The program will also supplement the finance costs of production, transportation, storage and related activities in an effort to bolster the coffee supply chain. The National Coffee Growers Federation in Colombia have reported that coffee production is forecast to potentially reach 12.60 million bags during the current October 2023 to September 2024 coffee year. The Federation have reported that the target production from this largest producer of fine washed arabica coffee is to reach 14 million bags by the end of 2025 and 16 million bags in 2027. This growth in production is reported to be driven by a 20% annual renewal of coffee plantations, an initiative being pushed by the National Coffee Growers Federation.
The harvest of the October 2023 to September 2024 Vietnam coffee crop, that is made up of 1.20 million bags arabica and 28 million bags robusta coffee, is now estimated to be around 75% complete. The harvest is gaining momentum in favourable, drier weather conditions. The harvest had initially been delayed due to a continuation of wet weather into November. With improved weather conditions now in play, internal reports are indicating an improved flow of coffee to the port city of Ho Chi Minh from the much-awaited 2023/24 Vietnam coffee harvest that will fuel robusta coffee supply to consumer markets into the new year.
The London futures continues to rally in what might be considered reaction to the limited supply environment from the two largest robusta producer countries, Vietnam and Brazil. The news from Brazil meanwhile is not one of tightness of supply, as the Conilon robusta harvest from their mid-year 2023/24 coffee crop is comparatively on par with the prior year, at an estimated 24 million bags, although geared towards the internal dynamics within a country with an estimated 21.50 million bags of local consumption that is primarily skewed towards Conilon robusta, does contribute toward the complexity of Conilon supply to exporters. The weather reports coming from Brazil continue to report higher than normal temperatures and drier weather, particularly in the key Conilon growing areas, which as the new 2024/25 crop develops, continues to contribute toward speculative sentiment as this drier weather may impact development of the new crop to come.
The new robusta crop to come from third largest robusta producer, Indonesia, is developing ahead of the start of the new April 2024 to March 2025 coffee year, and is needed to supplement a relatively low internal inventory, following their April 2023 to March 2024 coffee production year, that was put at 9.70 million bags by the latest U.S. Department of Agriculture Global Agricultural Network, of which 8.40 million bags robusta and 1.30 million bags arabica coffee. Cumulative exports over the same 2023/24 coffee year are estimated at 5.00 million bags, or 35.02% lower than the same twelve months in the previous year. The Indonesian domestic coffee consumption for the April 2023 to March 2024 coffee year is reported at 4.75 million bags. This normally supported by the permitted imports of other origin coffees, with Vietnam making up the largest percentage of this.
The Ugandan Coffee Development Authority UCDA have reported that their country’s coffee exports for the month of November were 21,636 bags or 4.84% lower than the same month last year, at a total of 425,526 bags. Uganda Robusta exports registered a 7.28% decrease when compared to the same month last year, to total 338,329 bags and Arabica exports registered a comparative 5.97% increase when compared to the same month last year to total 87,197 bags exported in October 2023. The UCDA also reports that the cumulative exports for the first two months of the current October 2023 to September 2024 coffee year to be 6,786 bags or 0.75% lower than the same period in the previous year, at a total of 895,226 bags. The UCDA have reported that during the month of November, the overall value of coffee exports has been seen to have increased by 10.12% when compared to the same month in the previous year, to total 70.69 million US Dollars.
Meanwhile, several of the world’s major shipping lines have announced this week that the geopolitical tensions and security concerns remain high via the Red Sea and Suez Canal, and shipping routes and lanes are being altered as a precaution. The shipping route from the Asia, east Africa and the Far East, for destinations in largest consumer bloc European markets, are being altered to ship via the Cape of Good Hope on Africa’s southernmost tip instead. This development may likely lead to a disruption in lead times as well as add cost to movement of all goods sailing times of these vessels that were originally intended to transit via the Suez Canal. The Red Sea is one of the world’s most densely packed shipping channels south of the Suez Canal, the most significant waterway connecting trade of goods between producer and consumer markets via this route, with an estimated 12% of global trade passing through the Red Sea, to include 30% of global container traffic.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 600 bags yesterday, to register these stocks at 242,999 bags, with 97.74% of these certified stocks being held in, Europe at a total of 237,516 bags and the remaining 2.26% being held in the USA at a total 5,483 Bags. Of this, a total 40,432 bags, or 16.64% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 67.68% of these certified coffees, originating from Honduras. There was meanwhile 2,090 bags decrease to the number of bags pending grading to the exchange; to register 28,800 bags pending grading on the day.
The January 2024 to March 2024 contract arbitrage between the London and New York markets widened yesterday to register this at 68.14 Usc/Lb. This equates to 33.67% price discount for the London Robusta coffee.
It was a firmer day overall on the commodity markets yesterday, as the US Dollar index held near a more than six-month low, a weaker US Dollar is seen to be a bullish factor for commodities traded in other currencies. The Coffee, Sugar, Wheat, Gold, Silver, Platinum and Palladium markets ended the day on firmer note, while the Cocoa, Corn and Soybean markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.272 Sterling, at 1.097 the Euro and with the US Dollar buying 4.864 Brazil Real.
The New York and London markets started the day yesterday trading north of par and in relatively thin volume. The markets continued to oscillate to either side of par during the remainder of the morning session. This saw the support start to build to see the markets moving above par. The New York market registered a firmer trajectory, gaining support throughout the session, with the London market following suit. This saw the market track upward as speculative buying support returned to the floor. As the afternoon progressed, the New York and London markets continued to gain momentum to rally late in the day around the opening of business day in the Americas’, both markets continued to move in a firmer direction accentuating the gains for the day. The upward momentum brought sellers back to the floor at the top of the day, and both New York and London markets hit a ceiling very late in the day to marginally limit the sessions gains. The New York market settled near to the highs of the day on a very firm note, while the London market followed suit to likewise settle on a very firm note, near to the highs of the day.
The London market ended the day on a positive note with 95.77% of the earlier gains of the day intact, while the New York market ended the day on a likewise positive note with 88.28% of the earlier gains of the day intact. This very firm close for the markets, with both the New York and London markets tracking upward throughout the session to settle near to the highs, might possibly see the markets set for a follow through steady start to early trade today, against the prices set yesterday, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
JAN 2960 + 136 MAR 202.40 + 11.30
MAR 2932 + 136 MAY 199.60 + 11.55
MAY 2860 + 130 JUL 199.40 + 11.10
JUL 2795 + 119 SEP 200.00 + 10.90
SEP 2752 + 119 DEC 200.95 + 10.55
NOV 2727 + 115 MAR 202.35 + 10.30
JAN 2705 + 115 MAY 203.05 + 10.25
MAR 2694 + 115 JUL 203.65 + 10.25
